SDLT: Multiple Dwelling Relief and the ‘Security and Privacy’ Factor
Except in the most straightforward residential transactions, stamp duty land tax is not a simple matter, particularly when you throw in the reliefs potentially available. Residential property and tax lawyers should particularly take note of a case1 illustrating the tribunal’s approach to the application of multiple dwelling relief (MDR) where a detached property was purchased.
A taxpayer can claim MDR on the purchase of more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.
In this case, MDR could not be claimed because the property in question was not configured in such a way that it comprised two self-contained living units generally suitable for separate occupation. It was, however, suitable for use as a single dwelling.
What happened in this case?
In 2017, Mr and Mrs Doe bought a London property for £2.7m. They paid SDLT in the sum of £237,750, but subsequently requested a refund of £80,250 on the basis that the property qualified for MDR.
HMRC opened an enquiry into the Doe’s SDLT return, issued a closure notice amending it by disallowing MDR, and requested repayment of the £80,250.
The property itself was detached and included an annexe using part of the first floor. The estate agent’s sales particulars were scrutinised as part of the tribunals’ consideration. Both the FTT and the Upper Tribunal rejected the Doe’s appeal against HMRC’s decision.
A key issue related to the statutory definition of ‘dwelling’ in para 7(2) Schedule 6B of the Finance Act 2003.
The FTT had concluded that the property did not qualify for MDR because it was suitable for use as a single dwelling, even though the annexe itself had a lockable door to it and had its own boiler and electrical circuit.
Crucially, the FTT found that access to the annexe within the property via the front door also gave access to the rest of the house. Furthermore, the main house and the annexe were found unsuitable for use as two single dwellings because of the insufficiency of privacy and security for the occupants. This, said the UT, was a reasonable conclusion to come to. It said: “Privacy and security are material and important factors.”
It was also “plainly relevant” that the property was not configured as two single dwellings and an objective observer would not consider that there were two dwellings.
Key takeaway
SDLT and the application of MDR and other reliefs can be a complex matter and this ruling is useful for lawyers in how such reliefs should be approached. Whether or not a relief can be claimed may well depend on the actual configuration of the property; the extent to which its occupants can use the property; and how an objective observer would consider the use of the property
If in doubt, take specialist advice from expert tax lawyers.
1Doe v HMRC [2022] UKUT 0002 (TCC)
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